When spring’s COVID-19 shutdowns put millions out of work, lenders and credit card issuers stepped up with payment relief and other special programs for struggling Americans. About seven months into the coronavirus pandemic, your options may be more limited, which could make for a frightening financial situation.
If you’ve lost income and wonder what you’ll do when COVID-19 relief runs out – especially as stimulus talks remain stalled – here’s how you can get through this nightmare.
Are COVID-19 Relief Programs Vanishing?
Millions of people remain out of work as some creditors have begun to pull back on COVID-19 financial relief programs. At the start of the pandemic, there was a lot of buzz about help from creditors.
“The timing of those programs was excellent compared to the response of many of the same creditors during the economic crisis of 2008-09,” says Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling.
Fast-forward to November, and things have changed slightly, he says. Even if programs introduced during the COVID-19 shutdowns are no longer available, most creditors will offer help in other ways.
“That doesn’t mean that options are off the table,” McClary says. “There is a benefit in calling your creditor, having a discussion about your circumstances and exploring solutions to keep it from getting worse.”
In fact, about a quarter of consumers in a September survey by the nonprofit American Consumer Credit Counseling said they asked their creditors for COVID-19 financial relief. They requested deferred or reduced payments, or lowered interest rates; 1 in 5 requests was denied.
Can You Still Find COVID-19 Relief for Credits Cards and Loans?
Some creditors and lenders still have programs for customers struggling to pay their bills during the coronavirus crisis. Whether you need help managing credit cards or loans, you can find help. Below are some of the relief programs available.
- Wells Fargo is offering deferred payments for two billing cycles. Contact customer service to discuss additional options if you continue to face challenges after the deferment period.
- Citi waives late fees and defers minimum payments on credit cards, allowing you to pay less than the minimum. You’ll need to sign in to your online account to request COVID-19 support.
- If you’re a Chase customer, you may be able to defer a payment on your personal or business credit card. Cardholders are encouraged to enroll online in the COVID-19 Payment Assistance Program.
- USAA members can access special payment assistance programs for credit cards, consumer loans, mortgages and home equity lines of credit.
- American Express can temporarily lower monthly payments and interest rates, as well as waive future late payment fees, for those who qualify.
- Discover has relief options, and cardholders should call customer service to talk about them.
The coronavirus rescue package passed in March puts two protections in place if you have a home loan backed by Fannie Mae or Freddie Mac, or a government agency. The first of these measures stipulates that your lender or loan servicer may not foreclose on you until at least Dec. 31, 2020.
Second, “Homeowners facing financial difficulties due to COVID-19 can get forbearance for up to a year,” says Madison Block, marketing communications and programs associate at American Consumer Credit Counseling.
Contact your loan servicer to request this forbearance. You will only need to claim a pandemic-related financial hardship, and your account will not accumulate extra fees, penalties or interest charges.
These relief measures have remained in place without issue. “For those individuals who have mortgages that are federally backed and protected under the CARES Act, I have not heard any issues,” McClary says.
You can skip federal student loan payments and pay no interest through the end of 2020, but those protections don’t apply to private student loans. The outcome of the 2020 election could determine what happens next: Will student loan debt be forgiven?
In the meantime, some states have negotiated relief agreements with lenders and loan servicers to offer borrowers at least three months of forbearance, waive late payment fees and more.
The clock is ticking, however, if you enrolled in a separate relief program early in the pandemic. You’ll need to contact your loan servicer to learn about your options.
What Can You Do if You’re Buried in Bills?
When forbearance isn’t available, you can ask creditors about hardship programs. These vary by lender, McClary says.
You can get through a rough patch by being proactive: Start a conversation with your credit card issuers and lenders about how to qualify for temporary relief programs.
- A late fee waiver. If you happen to miss a payment because you stumbled a bit, call the creditor right away and see if the late fee can be removed. If you’ve been a good customer, there’s a good chance the creditor will extend you that courtesy.
- A temporary interest rate reduction. This could help take some of the sting out of carrying a balance or facing more credit card expenses because of lost income.
- A temporary minimum payment reduction. If your minimum payment has become tough to afford, some creditors may be willing to take a little less for a short time.
Note that none of these solutions are intended for the long term. “They are designed for people who are dealing with a minor setback where they know they are going to get back on their feet in two to three months,” McClary says.
Who Do You Call if You Need Longer-Term Debt Solutions?
If you think you’ll be facing long-term or severe financial hardship, you need to communicate that to your creditors, McClary says.
“It’s always better to be able to operate out in the open than have them guess and take actions that are not helpful to you,” he says.
If going through this process with multiple creditors is too overwhelming, you might want to contact a nonprofit credit counseling agency, such as the National Foundation for Credit Counseling or American Consumer Credit Counseling.
“Calling a nonprofit credit counseling agency can be a good option for borrowers who are struggling and not receiving enough help from their creditors,” Block says.
A certified credit counselor can help you come up with a budget and a plan to pay off your debt. The counselor may suggest enrolling in a debt management program.
Will COVID-19 Payment Relief Hurt Your Credit Score?
Consumers in COVID-related forbearance or deferred payment plans will not see drops in their credit scores from FICO or VantageScore. Lenders must notify the three major credit bureaus – Equifax, Experian and TransUnion – if you’ve been placed in one of these plans.
Normally, when you negotiate the terms of a lending product in a way that causes you to pay less than agreed, your credit score may suffer, McClary says.
You can double-check that your accounts are being reported properly with free weekly access to online credit reports through April 2021 at AnnualCreditReport.com.
But if you have to choose between staying afloat financially or preserving your credit score, McClary says, “Take care of the necessities like food and shelter rather than obsessing about your credit score.” The good news is there are ways to restore your score after you make it through this crisis, he adds.
Are DIY Options for Managing Bills During COVID-19 Helpful?
A balance transfer credit card or a personal loan could help you manage monthly debt payments, with a few caveats.
Balance transfer credit cards with introductory no-interest periods – some for up to 20 months – can help you pay down your balance without finance charges. You’ll need to remain diligent and disciplined about clearing those balances off the books, though, before the 0% interest rate runs out.
This plan has a couple of downsides. The first is that you may not be eligible for a balance transfer credit card, McClary says.
“If you’re already missing payments, it’s going to be hard to qualify for the best balance transfer offers,” he says.
Second, some of these cards charge a balance transfer fee of 3% to 5% of the amount being transferred, Block says.
That’s cheaper than racking up months of interest charges, but you’ll need to manage your account carefully. If you don’t pay off your balance during the interest-free period or you miss a payment and are charged a penalty rate, you will owe interest on top of the balance transfer fee.
A personal loan is an alternative to a balance transfer credit card, but it’s also not without risks.
“A personal loan is not the best option for someone who may not be able to pay it back, especially in such uncertain economic times,” Block says.
Missing payments can seriously hurt your credit and make getting loans and new lines of credit harder, she adds.
The bottom line is reducing your interest rate or your monthly payments can be helpful, but you have to know what you’re getting into and have a solid repayment plan.
Protect Yourself From Credit Default
As lawmakers fail to pass another coronavirus relief package, you will need to ask for what you need from creditors. Try to reach out before you start to miss payments and put your credit at risk.
“Communicating with your lenders is the best way to ensure that you can get some type of payment plan worked out to keep your account in good standing, even if you have ongoing financial hardships,” Block says.
If you ask for something and the answer is no, don’t be afraid to try again, McClary says. “It’s OK to escalate and ask to talk to a manager instead of the representative,” he says.
If you’re struggling to make headway, consider turning to a nonprofit credit counseling agency to advocate on your behalf.
“Don’t rule out possibilities,” McClary says. “There’s always the chance that if you keep trying, you’ll get the result you’re looking for. And when it comes to debt relief, any progress is good progress.”